Sebi steps likely to prevent occurance

The Securities and Exchange Board of India (Sebi) would soon announce a set of measures to avoid instances of 'flash crash' in the market. These may include pre-checks on orders and pricing.

"We are likely to announce our measures very shortly so that there is a pre-check on orders and pricing. Some other checks would also be introduced to obviate the recurrence of such incidents (flash crashes)," Sebi Chairman U K Sinha said on the sidelines of Asia Securities Forum 2012.

In October, an erroneous order by Emkay Global Financial Services had led to the Nifty crashing by 900 points (15 per cent), forcing a 15-minute halt in trading. Following this, Sebi had set up a committee comprising technical experts to look into the crash and suggest preventive measures. Sinha said the committee had already prepared a report on the crash and the measures to be announced soon would be based on this report. He added separately, Sebi was also considering whether lapses at the broker- or exchange-levels had led to the incident.

Market sources said as a protective measure, Sebi might introduce temporary circuit filters for index stocks. These would be marginally lower than the index circuit limit of 10 per cent. Temporary halts in trading help check erroneous trades. Also, these help investors ascertain the factors behind the sharp movement in share prices.

In a separate development, Sebi is setting up a working group to rationalise investment routes for foreign portfolio investments in the country. Sinha said the group would comprise tax authorities and market participants. It would submit a report after studying the effects of aligning all routes for foreign portfolio investment into a single route.